Gold suffers as speculation shifts to US rate hikes

Goldfell on Monday as the dollar firmed on speculation over an earlier-than-expected hike in U.S. interest rates following strong job data, which dented investment demand for the metal.

Gold has been under pressure since data on Thursday showed U.S. employment growth jumped in June and that the jobless rate closed in on a six-year low, evidence of brisk economic growth. The data led investors to bring forward their views on timing of the first rate hike by the U.S. Federal Reserve to the middle of 2015, although most economists said that more data was needed.

An interest rate hike would encourage investors to withdraw money from non-interest-bearing assets such as gold.

Spot gold slipped 0.4 percent to $1,315 an ounce, while U.S. gold futures for August delivery settled down $3.60 percent at $1,317 an ounce.

The dollar was up for a fifth straight day to trade near its highest in almost two weeks against a basket of currencies. It gained support from the steady climb in U.S. bond yields since last week's robust U.S. jobs report. Returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest, as these are viewed as a key indicator of Fed action in coming months, analysts said.

Speculators raised net long positions in gold by 22,573 contracts to 136,929 in the week to July 1, data from the Commodity Futures Trading Commission showed on Friday. Physical demand showed some sign of improvement after remaining subdued for months, while selling of recycled gold increased as prices moved above $1,300 an ounce, traders said.